San Francisco)I look for markets that cashflow AND ones that have a supply/demand imbalance.

Where I was raised in Cupertino  same thing.. values compared to San Jose can be double or more.. 

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

What is your inspection experience in San Diego?

In San Francisco, renting illegal units is a double whammy as you technically cannot receive any compensation for an illegal space while at the same time you are unable to evict anyone due to the eviction control in San Francisco.

Comparing Markets:High appreciation markets (like Los Angeles, San Francisco, etc.) tend to have lower cap rates and higher property prices, making them less cash-flow-friendly but better for long-term appreciation.

I started off as an out of state investor back in 2021 while living in San Francisco.

I am a San Diego Attorney and am litigating cases involving these types of loans. 

I'm originally from San Francisco and started off as an out of state investor back in 2021 with a single family home. 

The price points are more reasonable than San Jose area.